As a small business owner, a very easy way to lose the trust of others is to not give them the things you promised when they handed you money. Another way is to take that money and waste it on craziness. These men did both, ArsTechnica reports.
Two years ago, Sonny Vleisides (right) introduced himself to the BitcoinTalk.org message board, explaining away some dodgy run-ins with law enforcement surrounding a gambling site he previously worked for. It looked like an attempt to come clean by a man who needed to earn the community's trust regarding his new venture: Butterfly Labs, a company that manufactured high-end computer equipment. He ended his post with optimism:
The bitcoin community and it's success are important to me and my past isn't a threat to it or to the BFL corporation. I hope you can see that.
It seemed to work: "I'm satisfied," read the first reply. Vleisides and partner Nasser Ghoseiri (left) went on to become some of the most hated actors in Bitcoin world, earning Kansas-based BFL a notoriously unscrupulous and scammy reputation, even in a fledgling finance sector that's no stranger to unscrupulousness. Years of customer anger are now a federal lawsuit, says ArsTechnica:
"The FTC alleges that one corporate defendant and three individual defendants have taken in over $50 million by operating a scheme that required consumers to pre-pay for machines that would allow consumers to 'mine' for Bitcoins, a new virtual currency," the complaint states. "Defendants either never delivered these machines or delivered them so late that they became obsolete."
If they weren't shipping out Bitcoin mining gear, what were they doing with all the money they made? According to complaint documents, they were spending it on themselves:
The FTC alleges Butterfly Labs' operators took customers for up to $50 million, which will buy you quite a few saunas. The FTC is now seeking to seize Butterfly's assets while the faltering company tells Ars "The government wants to shut Butterfly Labs down, and we are not going away without a fight to vindicate bitcoin, our company, and our employees."